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5 Ways to Use a Reverse Mortgage to Increase Financial Security

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Reverse mortgages are a great way to use the equity in your home to increase financial security. As the U.S. inflation rate continues to soar and recession seems inevitable, concerns for a financially secure retirement are mounting. While historically they may have been considered risky, there are responsible ways to enter into a reverse mortgage to increase your access to cash. 

Benefits of a Reverse Mortgage 

Some benefits of using a reverse mortgage:

  • Manageable requirements for borrowers (must be their primary residence, must keep home well-maintained and must stay up to date on things like HOA fees, insurance and property taxes)
  • No personal liability
  • Credit line growth
  • No maturity date
  • Prepayments are allowed
  • If the loan is in good standing, it cannot be canceled
  • Increase financial security

5 Ways to Use a Reverse Mortgage to Increase Financial Security

1). Delay Social Security Benefits

You can use a reverse mortgage to access the equity in your home to delay collection of your Social Security benefits. For example, according to the SSA, an individual whose full retirement age is 66 would get 105% of their monthly benefit by delaying the start of retirement benefits until age 67, and 129% of the monthly benefit by waiting until age 70. 

2). Pay Roth Conversion Taxes

If you are converting from a traditional IRA to a Roth IRA, you can use the funds from a reverse mortgage to pay the conversion taxes. This serves a dual benefit as it can prevent you from being bumped into a higher income tax bracket. 

3). Protect Investment Portfolio

In unpredictable financial markets, like in a recession for example, you can use your reverse mortgage to increase financial security. If your portfolio is dependent on the state of the market, drawing on a reverse mortgage can prevent you from needing to sell investments for cash. With a reverse mortgage you can avoid depleting your investments early. 

4). Purchase a New Home

If you’re 62 years or older and considering downsizing in retirement, you can use a Home Equity Conversion Mortgage (HECM) to buy a new principal residence and like all reverse mortgages, save the cash you would normally be paying towards the mortgage. An HECM line of credit can be particularly useful as interest only accrues on the funds you have withdrawn. Plus, the credit that is not withdrawn can continue to grow in value. 

5). Assist with Financial Burden of a Gray Divorce

Couples coming out of a long-term marriage may worry there is not enough of a financial cushion. Instead of liquidating joint assets or using the sale of a previous marital home, qualified borrowers can use the HECM to preserve their retirement portfolio. 

These are five great ways a reverse mortgage can increase your long-term financial security without excessive risk. While some may wonder if a reverse mortgage is right for them, there are a number of benefits to using the equity in your home. Contact us today to secure your retirement lifestyle. 

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